The war in Ukraine, global port congestion, and the persistent spread of COVID variants will conspire to raise prices on equipment and key building products by 7-9 percent this year, according to the general contractor Consigli’s latest market update, which it released a few days ago.
Authors Peter Capone and Jared Lachapelle, Consigli’s director of construction and vice president of preconstruction, respectively, wrote that while the nonresidential construction industry continues to be resilient, it can’t completely alleviate forces that are reducing or delaying the supply of raw materials and finished goods.
Russia’s invasion of Ukraine has reduced the supply of manufacturing materials such as aluminum and copper, and is putting a strain on production and delivery across Europe. Meanwhile shipping congestion “is showing little sign of improvement” worldwide, especially at ports in Asia.
Other factors contributing to rising construction prices include spikes in fuel costs, and wage increases that are jacking up labor costs. “Acquiring workforce, [in] the Northeast in particular, remains an area of concern,” the authors state. Union and non-union subcontractors “are booking up to capacity for 2022,” and are already focused on next year and beyond.
Electrical equipment and hardware, and roofing materials, are stalled in long lead times. As a result, price inflation for these products is expected to be double digit this year.
Consigli is also keeping an eye on a few things that could affect prices, such as contract negotiations with the International Longshoreman Warehouse Union that are scheduled for this July and will impact 22,000 workers at 79 ports.
The federal infrastructure bill, as it rolls out, will place more stress on an already tight labor market. Consigli notes that half of its larger subcontractors have secured 85 percent of their backlog for this year, and are “quickly filling” their projected backlog for 2023.
Related Stories
Market Data | Oct 19, 2020
Lower-cost metros continue to outperform pricey gateway markets, Yardi Matrix reports
But year-over-year multifamily trendline remained negative at -0.3%, unchanged from July.
Market Data | Oct 16, 2020
5 must reads for the AEC industry today: October 16, 2020
Princeton's new museum and Miami's yacht-inspired luxury condos.
Market Data | Oct 15, 2020
6 must reads for the AEC industry today: October 15, 2020
Chicago's Bank of America Tower opens and altering facilities for a post-COVID-19 world.
Market Data | Oct 14, 2020
6 must reads for the AEC industry today: October 14, 2020
Thailand's new Elephant Museum and the Art Gallery of New South Wales receives an expansion.
Market Data | Oct 13, 2020
5 must reads for the AEC industry today: October 13, 2020
Miami Beach Convention Center renovation completes and guidance offered for K-12 schools to support students with asthma.
Market Data | Oct 12, 2020
Majority of contractors fear long-term business implications of COVID-19, according to Construction Executive survey
While many contractors have not yet seen drastic impacts to their business, as construction was in many areas considered an “essential” service, the long-term implications are concerning.
Market Data | Oct 12, 2020
6 must reads for the AEC industry today: October 12, 2020
4 challenges of realizing BIM's value for an owner and Florida office property is designed for a post-Covid world.
Market Data | Oct 8, 2020
6 must reads for the AEC industry today: October 8, 2020
The first rendering of the National Medal of Honor Museum is unveiled and seven urgent changes needed to fix senior living.
Market Data | Oct 7, 2020
6 must reads for the AEC industry today: October 7, 2020
Water-filled windows' effect on energy and construction begins on PGA of America HQ.
Market Data | Oct 6, 2020
Construction sector adds 26,000 workers in September but nonresidential jobs stall
Many commercial firms experience project cancellations.